Larry Page Definitely Wants To Hang On To Motorola's Crappy Hardware Business

BI: What do you think of them taking on a new company with 19,000 companies that's been described as dysfunctional?

SL: I actually think that's their biggest problem. When Google reached 20,000 employees, there were a lot of worries and concerns: "Look how big we are, how can we maintain our nimbleness?" Now they're taking on 19,000 employees who aren't chosen by their standards. Motorola has a culture of their own, a culture that certainly Google doesn't endorse. There's the question of how much are they going to be integrated into Google and how will Google maintain that?

I haven't heard anything from Google, in the conference call or anywhere that it's talking about that. That to me is the biggest problem because Google's attempts to maintain its culture in the face of growth is among it's highest concerns. There was already this challenge of growing from 24,000 to 30,000 this year and now it's going to be almost 50,000 people. That's a huge company.

BI: Does Google have the stomach to go into a town in Illinois and fire a ton of people?

SL: I think they do. Why wouldn't Google want to make the workforce of its new company reflect its own values which would mean getting rid of some people and bringing on other people. Larry Page vets every single employee hired at Google, do you think he's going to take on 19,000 employees and not care about how they perform or how well they meet his standards?

BI: Google has never done layoffs, have they?

SL: They've done it in a small way. They laid off some recruiters during the recession when they thought they would stay relatively stable for a brief period, about a year or so, and that caused big ripples. It's a different thing to lay off people when you take on a new company as opposed to letting go of people who you've hired. I don't believe anyone thinks Google wouldn't need to streamline a workforce of a company you just bought, which is not known for being lean and mean.

BI: Shifting back to Larry Page and the strategy, do you think this is him looking at Apple which is doubling its profits year over year and almost doubling revenue on the back of iPad and iPhone sales? Do you think they can integrate like that? Do you think that's an influence?

SL: Traditionally Google follows their own path. They don't look at other companies and say, "Wow we want to be like that." Even though they admire Apple, I don't get a sense they said, "We want Android to look more like the iPhone, in terms of the business model." I think they're thinking, this is going to help them move forward with their Android vision.

It's speculation but they've put a lot into the idea Android would be an open system with many many partners. I really don't think the Motorola thing is something where they're eventually going to say, "We don't want anymore partners, we want to be like Apple."

SL: My guess is, you look at the time they did go off on their own and say to the partners, "We're doing our own hardware." The impetus for that was not only to create a phone with the hardware specs that their designers liked, but it was to push a different business model and that didn't work because they didn't get the cooperation they needed to sell these things online.

But maybe if they wanted to push a different business model, they'd be better positioned to do that with Motorola because its relationships with carriers are deeper than Google's -- the pre-existing market, channels, and things like that.

Google is a company that likes to disrupt the way business is done. I wouldn't be surprised if Google did something like, we're going to build this great phone and give it way and there would be some carrier deal or maybe even Google software built in, it would make it worthwhile there. What I'm looking for is, what disruptive business models or changes from the way things are done now, is Google going to implement?

Now this is a long way away. It's another year before Google takes over the company because of reviews and things like that. This puts Google in a position to do the disruptive things they like to do.